Capital Gains Tax, PLEASE HELP

Hi everyone,

Was wondering if anyone could give me some advice on capital gains tax. I know there is a rule that you can rent out your house for a maximum of 6 years, move back in and later sell the property to avoid capital gains tax, but does this apply if you have another property? We purchased our house, lived in it for 2 years, then moved to Melbourne and decided to rent it out while we were gone. We have been here for 4.5 years while it has been rented out, but in the meantime have purchased another property, which we are currently living in. Not sure if we will rent this one out or sell it yet, as we are planning to move back up to Queensland, but would really like to sell the other one. Does anyone know if I can avoid capital gains tax?
Thanks for your help, Tracie.

 

Tracie

I am not an accountant but from what I know you can only claim your CGT exemption on 1 property. So if you decide to claim your exemption on your Melbourne property you will still be liable for CGT on your 2nd property.

I'd look at both and see what CG each 1 had and then decide which 1 to claim it against.

Have you got valuations done before and after the rental period?
I ask because sometimes we have prices going nowhere for a few years and then prices doubling in a couple of years so if your property did not appreciate in value over the period you had it rented out you would not need to pay any CGT. But you would need to have proof of that.

Cheers

 

Hi Tracie

You can arrange a retrospective valuation for the rental property as at the date you offered it for rental. If you engage a registered valuer, they will be able to draw on comparative sales to arrive at what the property was worth at that time. That will then become the vlaue against which your sale price is compared.

eg. you paid $250K for the house, lived in it 2 years and move out, registered val says its worth $500K at that time you left, you keep it 4 years, then sell it for $500K, there is $0 CG

Cheers